United States

Accounting and reporting for endowment funds

MUSE  | 

The Uniform Prudent Management of Institutional Funds Act (or UPMIFA) was designed to provide guidance and authority to charitable organizations regarding the management and investment of endowment funds held by those organizations.

Intended as a protection for charities as well as for the interests of donors who want to see their contributions used wisely, UPMIFA emphasizes that investment decisions must be made in relation to the overall resources of the institution and its charitable purposes. To date, 49 states, the District of Columbia and the U.S. Virgin Islands have adopted or enacted a version of UPMIFA.

Since UPMIFA's enactment in 2006, confusion and inconsistency in accounting and reporting for endowment funds have continued. The FASB Staff Position 117-1 (now codified in ASC 958-205) was issued in 2008 to address the accounting and reporting issues brought about by UPMIFA, provide guidance on the net asset classification of donor-restricted endowment funds and prescribe enhanced disclosures about an organization's endowment funds. While both UPMIFA and ASC 958-205 are intended to enhance accountability and transparency of an organization's management of its endowment funds, there has been much disparity in the accounting and presentation of endowment funds in an organization's financial statements.

Through the use of example donor-restricted and board-designated endowments – plus a series of recommendations to address the common challenges found in accounting and reporting for endowment funds – you will gain a better understanding of how endowment funds will be presented in the financial statements pursuant to UPMIFA and ASC 958-205.